USD
- The Fed left interest rates unchanged as expected while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
- Fed Chair Powell stressed that they want to see more evidence of inflation falling back to target and that a rate cut in March is not their base case.
- The latest US GDP beat expectations by a big margin.
- The US PCE came mostly in line with expectations with the Core 3-month and 6-month annualised rates falling below the Fed’s 2% target.
- The US NFP report beat expectations across the board by a big margin.
- The ISM Manufacturing PMI surprised to the upside with the new orders index, which is considered a leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat expectations across the board with the employment sub-index erasing the prior drop and prices paid jumping above 60.
- The US Consumer Confidence report came in line with expectations but the labour market details improved considerably.
- The market now expects the first rate cut in May.
CAD
- The BoC left interest rates unchanged at 5.00% as expected and dropped the language about being prepared to hike if needed.
- The latest Canadian CPI beat expectations across the board with the underlying inflation measures remaining elevated, which should give the BoC a reason to wait for more data before considering rate cuts.
- On the labour market side, the latest report missed expectations although wage growth spiked to the highest level since 2021.
- The Canadian PMIs improved in January although they remain both in contractionary territory.
- The market expects the BoC to start cutting rates in May.
USDCAD Technical Analysis – Daily Timeframe
On the daily chart, we can see that USDCAD bounced on the 50% Fibonacci retracement level and rallied all the way up to the recent high following the strong US NFP report. The sellers stepped in around the high with a defined risk above it to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the next resistance at 1.3620.
USDCAD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a better risk to reward setup around the 1.3460 level where we can find the confluence with the 50% Fibonacci retracement level and the 21 moving average. The sellers, on the other hand, will want to see the price breaking below the support zone to increase the bearish bets into the 1.3360 level.
USDCAD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is now right at the resistance. It will be interesting to see what happens here in the US session as a break above the level should see the rally extending to new highs while a strong rejection is likely to take us back to the 1.3460 level.
Upcoming Events
This week is basically empty on the data front with just a couple of key economic releases on the agenda. On Thursday, we will see the latest US Jobless Claims figures while on Friday we get the Canadian labour market report.
